NEW: Insiders at companies rushing to make vaccines and treatments for Covid-19 have walked away with more than $1 billion after well timed stock sales.

At Vaxart, the story is particularly crazy... THREAD

w @JesseDrucker https://www.nytimes.com/2020/07/25/business/coronavirus-vaccine-profits-vaxart.html

Vaxart is a small South San Francisco biotech firm. It has 15 employees and has never brought a vaccine to market. Last year, a hedge fund, Armistice Capital, took a controlling stake and got 2 board seats. Armistice also got warrants for an additional 21m shares at $.30 and 1.10

In Jan, Vaxart started working on a Covid19 vaccine. The stock ticked up through spring.

On June 8, Vaxart amends the Armistice warrants agreement, making it easier for the fund to immediately buy those shares.

A week later, $VXRT gets a new CEO: a former Armistice employee.

The CEO gets a bunch of stock options, of course. But the terms are unusual. Instead of vesting in a year or more, as is typical... they vest early if the company's share price pops in the next few months, or if the company is sold. (Guess what happens next?)

The stock pops! Vaxart announces it is joining the Russell 3000 and that it has a new manufacturing partner. But then on June 26, the big reveal: "Vaxart’s COVID-19 Vaccine Selected for the U.S. Government’s Operation Warp Speed" !

But there was just one problem...

Vaxart’s was being included in a preliminary primate trial in conjunction with Operation Warp Speed. But Vaxart was not among the companies selected to receive significant financial support from Warp Speed. Here's what HHS had to say:

Some at HHS are concerned about whether companies including Vaxart are trying to inflate their stock prices by exaggerating their roles in Warp Speed, and have relayed those concerns to the SEC...

Back to Armistice though... As soon as Vaxart makes it's Warp Speed announcement on Friday, the hedge fund exercises ALL its warrants, buying shares for as little as $0.30 apiece. It then unloads nearly all its shares over 2 trading days for profits well over $200 million.

And that's that.

“Vaxart is disrupting the vaccine world,” Mr. Floroiu boasted during a virtual investor conference on Thursday. He added that his impression was that “it’s OK to make a profit from Covid vaccines, as long as you’re not profiteering.”

Read the whole thing here and subscribe to the Times. https://www.nytimes.com/2020/07/25/business/coronavirus-vaccine-profits-vaxart.html

With @JesseDrucker Edited by @davidenrich